How Much Do You Know About Your Credit Score?

How Much Do You Know About Your Credit Score?

RECBL - Real Estate News

While your credit score affects everything from your ability to buy a car or a home to how much interest you will pay on the loan, many people don't know how these scores are calculated or what impacts them positively or negatively.

Moreover, says the Credit Federation of America (CFA), more than 25 percent of respondents in a recent survey did not know that a low credit score could increase the cost of a car loan by $5,000.

More than half didn't realize that utility companies, cellphone companies, and even insurers sometimes check credit scores before issuing services - or that multiple inquiries in a short time, as when you are shopping for a loan, are treated as one inquiry in order to minimize the impact on your score.
The CFA provides more about credit scores that every consumer should know:

All your credit scores are not the same - Most people assume their credit score is a single three-digit number, but each of the three major credit bureaus (Experian, Equifax, and TransUnion) scores you differently, since they don't necessarily have the exact same data in their files.

Closing old accounts will not necessarily boost your scores - Closing old or inactive accounts may inadvertently lower your credit score because now your credit history appears shorter. If you want to simplify, close newer credit accounts first or put the cards away so you don't use them but your credit history stays intact.

Paying off a bad debt will not erase it from your score - Once a debt goes to collection, or you've established a history of late payments, you will deal with the consequences even if you pay off what you owe. It will show as paid, but it is not erased. Also, while your score will get a boost if you pay off an old debt, it may not be by as much as you think. The best way to increase your scores and keep them high is to make payments on time every month over the long haul.

Co-signing for a loan impacts your scores - When you co-sign for someone else's loan, you are responsible for the debt - and if the person you’re co-signed for does not pay, your credit score will be impacted.

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The ABCs of FICO

The ABCs of FICO

RECBL - Real Estate News

Most people don’t think too much about their FICO scores until they want to get a loan. No matter the type of loan you want-mortgage, new car-the higher your FICO score, the more likely you’ll be approved.

Understanding the five factors that make up your scores can be the first step toward improving them. Financial experts at the Motley Fool break down where your scores come from and suggest a few ways to improve them.

Know Where Your FICO Score Comes From

Payment History - Thirty-five percent of your score is determined by whether you pay your bills on time every month.

Credit Utilization Ratio - Thirty percent reflects your credit utilization ratio-the percentage of available credit you’re using. Using less than 30 percent of your available credit can help your credit score.

Length of Credit History - Fifteen percent reflects the length of your credit history. Paying bills consistently over time can definitely work in your favor.

New Accounts - Ten percent of your score is based on the number of accounts you open. Opening too many new accounts simultaneously suggests you’re highly reliant on borrowing to keep up with your expenses.

Credit Mix - Ten percent reflects the types of accounts you have. Credit bureaus make a distinction between your credit card accounts versus student loans, car loans, and mortgages.

Three Ways to Improve Your FICO

Pay off a chunk of your balance. If you carry a balance, pay off as much as you can, even if it means you must work a second job or sell off stuff you no longer need or use.

Ask for a raise in credit limit. If you’ve paid your bills consistently, this may not be difficult to get-and since your credit utilization ratio carries significant weight, that should help to improve your overall score.

Correct reporting errors. It’s estimated that 20 percent of credit reports contain errors. If you spot one on yours-such as an error in the amount you owe or a paid-off account not shown-getting it corrected will almost certainly boost your score. Review your FICO score for free once each year to make sure it’s accurate.

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CONSUMERS KEEP CONFIDENT ABOUT CREDIT

Consumers Keep Confident About Credit

Cash Buyers Lists News​​

Consumers are more confident about credit accessibility, with more not only expecting to be able to obtain financing now, but also in a year from now, according to the results of the Federal Reserve Bank of New Yorks Survey of Consumer Expectations (SCE) for December 2016. Approximately 23 percent of those surveyed expect to be able to obtain financing in the future-a proportion last seen two years prior, in December 2014.

Less consumers, in turn, expect to miss a debt payment in the next three months: 14.3 percent, down from 14.9 percent in November.

More consumers also expect their household incomes to increase, a reversal of trend at 2.8 percent, and expect to increase their household spending, as well, at 3.7 percent, according to the survey.

Consumers, in addition, expect home prices to change-a sentiment rising to 3.3 percent in December and concentrated among higher-educated, under-60 and wealthier respondents.

Consumer expectations about the job market also improved, with the "perceived probability" of finding a job and losing a job increasing and decreasing to 55.6 percent and 15.8 percent, respectively. Expectations in terms of inflation over both the next year and the next three years increased to 2.8 percent.

Source: Federal Reserve Bank of New York

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